People in Ireland may have to pay more for mortgages and personal loans because of the international debt crisis, according to credit rating agency Moody’s.
Fears over Ireland’s national debt saw the cost of borrowing on international markets soar last week, culminating in a virtual freeze on buying and selling of Irish bonds on Friday, The Sunday Tribune reports. For the first time in recent history, Ireland is paying more to service its debts than Poland.
Yields on 10-year government bonds rose to 6% last week and the yield on two-year bonds rose by 50% to more than 4.5%.
“The government needs to borrow about €55bn more from the markets over the next 30 months and paying a higher interest rate threatens to push up debt service costs by many hundreds of millions of euro, potentially leading to another painful round of spending cuts and tax rises,” according to the newspaper.
Separately, the Sunday Business Post has more potentially miserable news for many of the 300,000 mortgage holders who now find themselves in negative equity. Banks are preparing to go after the parents of defaulting borrowers who have guaranteed their children’s loans.
Parental guarantees became prevalent during the Tiger years as young people were encouraged to scramble onto the bottom rungs of the housing ladder at any price. Some parents limited themselves to a fixed amount but others co-signed the mortgage documents, taking on full liability as a result.
The newspaper quoted an AIB spokeswoman who said the bank still accepted parental guarantees “where appropriate” but “we reserve the right to pursue these guarantees in situations of default”.